There are a lot of cryptocurrencies in the market, especially nowadays. These cryptocurrencies operate on individual blockchains, and connections and exchanges between these blockchains are hard to process. This is where Cosmos comes in. It addresses the interoperability issue that is present in the cryptocurrency market.
Cosmos is the “internet of blockchains”. According to its website, it is “an ever-expanding ecosystem of interconnected apps and services, build for a decentralized future”. It is a decentralized ecosystem of independent blockchains that can scale and connect with one another. Much like the internet, it connects native blockchains and external blockchains, letting them communicate and exchange information.
How does it work?
Cosmos uses an inter-blockchain communications protocol (IBC protocol) that organize independent blockchains into zones. These zones are then connected through a specialized blockchain called a hub. Hubs are able to connect and interact with other hubs. Blockchains outside of Cosmos, like the Ethereum and Bitcoin, are also able to connect to it through peg zones. A peg zone is an IBC-compatible blockchain that tracks the state of another blockchain. The peg zone establishes finality for the blockchain it bridges. With the IBC protocol, each individual blockchain maintains control of its own governance, but also becomes interoperable with other blockchains on the network.
The Cosmos blockchain is divided into two layers: the network and consensus layer and the application layer.
The first layer is run by the Tendermint BFT. The Tendermint BFT helps developers focus on development instead of the protocol that runs the network. It runs the Byzantine Fault Tolerance consensus mechanism that guarantees the safety of the network against malicious operators.
The second layer consists of the Cosmos Software Development Kit (SDK). The software development kit translates popular programming languages like Java and C++ to Cosmos’ own language. The SDK makes it easier for individuals to develop their own blockchains that can run in the network.
The ATOM is Cosmos’ native token. It is a proof-of stake token that powers the Cosmos hubs and transactions. An individual can delegate tokens into a validator pool and earn rewards. The more ATOMs an individual stakes, the more rewards they get. It is important to remember that staking locks the ATOM.
It is also important to note that independent blockchains within the Cosmos network can have their own native tokens. The users of these independent blockchains can opt to pay fees for Cosmo’ apps in their own native tokens instead of using the ATOM.
A Brief History of Cosmos
Cosmos was developed by Jae Kwon and Ethan Buchman. They co-founded the network in 2014, at the same time as they were creating Tendermint. Jae Kwon and Ethan Buchman authored the official whitepaper.
The Interchain Foundation (ICF), a Swiss non-profit organization that funds open-source blockchain projects, helped develop and launch it. The ICF held a two-week initial coin offering of the ATOM in 2017. In 2019, Jae Kwon and Ethan Buchman launched the Cosmos software. Jae Kwon stepped away from the project in early 2020, but promised to stay involved. Meanwhile, Ethan Buchman is still very involved in the project, being the president of the Interchain Foundation Council.
Cosmos has seen a rapid increase in market value, especially in 2021. It has gained almost 525% as of September 2021, starting off the year at $6.49 and reaching $40.64 in September. However, it has strong competitors like Polkadot (DOT) and Avalanche (AVAX). There are also talks of increased regulations in cryptocurrency, which can hurt its prices.